Net Zero Nonsense

There is a lot of nonsense being spouted at the moment, particularly by right wing

politicians, denouncing the pursuit of net zero as a bad thing that is costing the

consumer and somehow damaging British industry. At MyFootsteps we do let the

facts get in the way of a good story, so here goes.

Yes, Britain’s journey to net zero is having some impact on energy prices, as we

transition to cleaner energy sources, invest in renewable infrastructure, and phase

out of fossil fuels, but at the same time it is helping provide more secure energy.

Here’s how:

Investment in Renewables. The UK is heavily investing in offshore wind, solar, and

nuclear energy. While these sources will lower costs (and carbon) in the longer run,

the upfront investment and grid upgrades are adding pressure on energy bills, as

companies look to pass through their cost of capital to customers. The UK’s

electricity grid was built around fossil fuel power stations, such as coal and gas.

Transitioning to renewables requires significant upgrades, including new

transmission lines, storage solutions (such as batteries), and smart grid

technologies, although the network would have needed upgrading in any event.

Carbon Pricing & Taxes. The UK’s carbon pricing mechanisms (Carbon Price

Support) make fossil fuel-based energy more expensive than they might otherwise

have been, thus encouraging suppliers to shift towards greener alternatives. Other

European countries are operating similar schemes.

Reduced Reliance on Fossil Fuels and Market Volatility. As the UK moves away from

coal and gas, supply constraints - specially during periods of low renewable

generation (e.g., low wind) – it can lead to price spikes as the generation switches

back to fossil – the so called “clean spark spread”. While renewable energy is

cheaper to generate, it obviously depends on weather conditions. To maintain stable

supply, backup systems (gas-fired power plants, battery storage, or imports) are still

needed, and gas remains stubbornly expensive, mainly due to Europe cutting off

Russian supply following the war in Ukraine, which has a knock-on effect in the UK.

Government Policies & Subsidies. While subsidies for renewables aim to reduce

costs, they are often funded through levies on the energy companies, who in turn

pass costs through to consumer energy bills (e.g. ECO scheme). However, as

technology improves, the cost of renewables is expected to decrease.

In summary, the net zero transition is probably contributing to slightly higher energy

prices (than they might otherwise be) as companies look to claw back the cost of

capital on their renewable investments, whilst the cost of generating renewable

energy—especially wind and solar—have fallen significantly and are now actually

cheaper than fossil fuel generation. Renewables also help create a more stable

energy system – so called energy security - by reducing our dependence on

imported oil and gas (often from unfriendly regimes) as well as obviously reducing

our carbon footprint. By far the biggest factor in the inflated cost of electricity in the

UK (versus continental Europe or historical prices) is the high cost of natural gas,

which is still used to generate ~ 40% of Britain’s supply. Gas is traded on a global

market, therefore the answer to electricity price reduction is not more British gas

(which would be sold at the same price as imported gas).

Populist politicians pretending there are simple solutions to complex problems -surely not?